EC Drops Antitrust Inquiry Over ContentGuard

The European Commission said March 15 that it had dropped its antitrust investigation into Microsoft and Time Warner's purchase of ContentGuard, the U.S. producer of anti-piracy software for Internet

(The Hollywood Reporter) -- The European Commission said March 15 that it had dropped its antitrust investigation into Microsoft and Time Warner's purchase of ContentGuard, the U.S. producer of anti-piracy software for Internet music and film distribution.

The commission -- the European Union's executive arm -- made the decision a day after French electronics firm Thomson SA formally joined the takeover with a 33% stake in the deal, meaning no single company will have full control and the transaction is not subject to EU merger rules. Thomson, Microsoft and Time Warner will each hold equal 33% voting positions and will each appoint two executives to the ContentGuard board.

The decision to drop the probe is seen as a victory for Microsoft, which ran foul of the commission's antitrust investigators last year when they fined the software giant a record €497 million ($610 million) for abuse of its dominant position and ordered Microsoft to remove the music and video playing software Media player from its Windows operating system.

In a statement, the commission said: "Following a substantial change in ContentGuard's governing rules and the entry of a new shareholder [Thomson], Microsoft will no longer have the ability to impose in ContentGuard a licensing policy that would put its rivals in the digital rights management (DRM) solutions market at a competitive disadvantage."

The commission also sounded a warning note, saying it would closely watch the DRM sector and would take further antitrust action if necessary. Speaking at the European Parliament in Brussels, commission competition director General Philip Lowe insisted: "That does not necessarily remove any antitrust concerns in the long term. We'll have to monitor what goes on in the market."

ContentGuard is one of the main DRM patent holders, controlling the rights to the software that enables digital content, such as music or movies, to be transmitted over an open network or between devices.

The commission said DRM was set to become pervasive throughout the entire information technology industry. It is already the standard for online delivery of media content such as music and video.

Its antitrust probe focused on concerns that the deal would have allowed Microsoft to use its monopoly over PC operating systems to control the computer-chip market.